×

Plan to tax art sparks new fiscal row in France

* Socialist lawmaker pushing for wealth tax to cover art

* Government under pressure to oppose the measure

PARIS, Oct 11 (Reuters) - A push to extend France's wealth tax to artworks is stirring up a new fiscal flap for President Francois Hollande's Socialist government as it carries out an unpopular belt-tightening drive.

The lower house of parliament's finance committee backed an amendment to the 2013 budget on Wednesday that would apply the tax to art, even though the measure is divisive for both the left and right.

With a long tradition of public support for the arts, France has spared artworks from the wealth tax ever since former Socialist president Francois Mitterrand introduced the levy in the early 1980s.

People with assets worth more than 1.3 million euros ($1.68 million) are liable for the wealth tax of 0.25 percent on top of their income tax. The rate doubles to 0.5 percent for assets over 3 million euros.

Hollande's cash-strapped government has already come under fire for adding new taxes on the rich, especially for a new 75 percent tax rate on incomes over 1 million euros which is prompting some wealthy French to consider moving abroad.

The Socialist lawmaker behind the amendment on art, Christian Eckert, said the measure was more about fiscal justice than raising new revenues, which he acknowledged were unlikely to be significant.

Under the amendment, artworks worth more than 50,000 euros would be included in the assets used to calculate a person's fortune. Eckert had originally sought the threshold to be 5,000 euros.

The amendment quickly ruffled feathers in the Paris art world just as it is preparing for the opening next week of its annual flagship art show, the FIAC.

"I think we should be extremely careful in France and very vocal against the extreme danger of this bill," said FIAC director Jennifer Flay.

"It would compromise the art market's healthy fundamentals and put at risk the means by which artists make a living," she added.

Although Culture Minister Aurelie Filippetti has voiced opposition to the measure, some critics, l ike conservative lawmaker Michele Tabarot, a member of the opposition, ar e urging Prime Minister Jean-Marc Ayrault to take a firm stand against the amendment which will be voted on by the lower house of parliament next week and then go before the Senate. The Socialists have a majority in both chambers.

The fiscal credibility of President Hollande's government already took a knock last week when high-profile protests by business owners forced the government to retreat from plans to raise taxes on entrepreneurs when they sell their companies.

Hollande is pushing through France's toughest budget in at least three decades, relying heavily on tax increases on the wealthy as it seeks to get its deficit down to 3 percent of national output next year from 4.5 percent this year.

Socialist party veteran Jack Lang, Mitterrand's culture minister when the wealth tax was introduced, urged lawmakers to vote against the measure on art, warning it would harm the art market and France's cultural reputation.

"It would cause a haemorrhage of art, and collectors' exile to more welcoming countries," Lang said in a statement.

Stephane Jacquin, head of wealth management at Lazard Freres Gestion, said he did not expect the amendment to get sufficient backing in parliament.

"This isn't the first time this debate has come up, and each time art continues to be excluded from the wealth tax," he said. ($1 = 0.7751 euros)

(Reporting by Leigh Thomas and Lionel Laurent; Writing by Leigh Thomas; Editing by Susan Fenton)

((leigh.thomas@thomsonreuters.com)(+33 1 4949 5143)(Reuters Messaging: leigh.thomas.thomsonreuters.com@reuters.net))

Keywords: FRANCE BUDGET/ART